Seeding and Acceleration Arrangements: A Guide for New and Emerging Managers

The success of the hedge fund industry relies not only on its ability to perform, but also on its ability to remain diversified, innovative and competitive. New launches and the establishment of new managers are crucial to ensuring such diversification, innovation and competition and driving a high-performance culture within the market.

Yet, despite the benefits offered by new and emerging managers, investor concentration levels have increased significantly in recent years, with investors increasingly displaying a preference for managers with a longer track record and a ‘brand name’ that inspires confidence from a risk management and governance perspective. The rise and success of ‘multi-managers’ continues to attract assets away from start-up managers, whilst increased regulatory scrutiny and cost barriers to entry have further accelerated the trend towards a concentration of assets.

The availability of seed capital is therefore important to help ensure that a balance is struck to avoid stifling competition and innovation in the industry with a negative impact on the asset class as a whole.

For guidance on structuring seed deals in light of market trends and seeder demands, we invite you to download Dechert financial services partner Craig Borthwick and associate Freddie Newman’s article on the topic.